Wednesday, 29 October 2014

South Africa CLEARVU ruling out today - keyword advertising

Cochrane Steel
had sought to interdict M-Systems for passing off because it bid on CLEARVU as
a Google keyword generating adverts for its own products. The court held that
where the use is solely as a keyword (i.e. it is not visible in the advert
triggered) there is no likelihood of confusion or deception and therefore
passing off does not occur.

M-Systems bid secure

The court also rejected an attempt to establish
“leaning on” as a new species of unlawful competition. The interdict
application was rejected and costs were awarded to M-Systems. The decision was
handed down this morning in the Gauteng High Court (Johannesburg) by Judge
Nicholls.

Timo Meintjes of
M-Systems is “pleased with the decision because it promotes choice and
competition which are good for the consumer, especially when there is no
likelihood of confusion which the Judge found to be the case”

Yours truly and Ian Learmonth who acted for M-Systems provide further legal commentary here. Background to the decision can be obtained here.

A discussion of the case will take place through an interview with Gareth Cliff at CliffCentral studios on 13 November at 6pm. If you want to register please email us here. Spaces are limited so please hurry.

Notes:

The case is
important because:

·it is
the first case in Africa on whether the bidding on a competitor’s trade mark
for keyword advertising is unlawful, an IP issue of much national and
international debate

·it
provides further clarity on the scope of passing off, in particular that the
concept of “leaning on” is not part of our law and that keyword bidding
(without more) is unlikely to be trade mark infringement

·for
Google, it supports their advertising model for South Africa

·it is
of interest to all brand owners that use a website or other online marketing
platforms

Take home
points for brand owners are:

·Bidding
on a competitor’s trade mark as a keyword is not generally unlawful unless:

oThere
is a likelihood of confusion eg counterfeit site or there is use of the mark in
the text of the sponsored link or advert which leads to confusion

oThe
trade mark is registered and well known, and the owner is able to establish
that there is an unfair advantage taken, or dilution can be shown

·Legal
advice should be sought if a competitor’s trade mark will be used for keyword
advertising

·Brand
owners need take steps to combat the risk of aggressive adwords campaigns by
competitors when formulating their marketing strategies

The case is open
to a request for leave to appeal. Link to the judgment here.

Hi Darren. Thanks for this. To be honest, I was disappointed with the court's justification for dismissing leaning on as a cause of action in our law. It may be that the merits of this particular case warranted the dismissal of the claim, however the court's refusal to accept that anything other than confusion is not actionable at common law is disappointing. Our common law of unlawful competition has always been a flexible remedy and there is case law to the effect that it should not be limited to particular categories of wrongful conduct, i.e. only passing off. See the result in Schultz v Butt. This has always been an advantage our law has had over UK law, where you don't have a general delict of unlawful competition, as we have here.

The court's insistence on only permitting an unlawful competition claim where there is confusion would leave us in a position where traders can harm their competitors by trading in an unfair/unconscionable way that contravenes the boni mores and general sense of justice of the community with no recourse to the courts. The court's failure to assess the matter through the lens of the general delict of unlawful competition and the boni mores principle is open to question in my view. A good argument can be made that the ASA code and the Trade Marks Act encapsulate the boni mores, which, if accepted, could possibly have yielded a different result.

It also leaves our law with an uncomfortable gulf between registered trade mark protection and unregistered protection. The Trade Marks Act and our common law have been aligned over the years, for example regarding well-known marks, and this was a good opportunity to align them further. Surely the advertising function of an unregistered mark is as worthy of protection as that of a registered mark?

As mentioned, the merits of this case may have been such that even if leaning on was accepted as part of our law, the claim should have been dismissed. However, personally I feel that the court didn't canvass the issues regarding acceptance of leaning on into our law broadly enough.

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